Use Multiple Contracts To Reduce The Stress Of The Exit

The other night (Australia time) I was trading wheat and found myself long 4 contracts in an erratic trading session.
Sadly, I had missed the first great breakout to the downside, and felt that the lows for the day had been made. Eventually I went long at about 944 with a target of 954.5.
Now the first thing to notice is that the very best thing I could have done is automated my exit and gone to bed! This is the strategy recommended in my eBook whereby I would have entered a stop loss order at about 942, a limit order at 954 and a market order to exit 30 seconds before the end of the session. The orders are linked in a One Cancels Other group so that only one of them ever executes.
However, on this evening I did not take my own advice, and settled down to watch the progress of the trade.
Pretty early on there was an exhilarating spike up to 951.75 followed by a distressing decline right back down to 944.5. Then we were off to the races again with a move up to 953, only to have our hopes dashed as price swooped back down to 946. Finally, after much sideways action there was another burst up to 955 before a calamitous nosedive into the close.
I do not know about you, but I hate to sit and watch a session like this!
I still say the best way to handle the situation is to automate your exits and walk away. What you do not see, you do not stress about. But if you must watch, there is something else you can do.
In this instance, I was long four contracts. When that first happy spike came, I sold a couple of them just over 950. Now, even if price declined and hit my stop for the other two contracts at 942, I am still in the black for the day.
Once I have done this, I quite enjoy watching the session. I know I cannot lose and there is a chance of quite a big win, which is what happened in this case.
Of course, I have given away some profit. If I had held on I could have sold all four contracts at 954 instead of dumping two of them cheaper. But that is a price I am happy to pay to reduce the stress of trading.
Anyway, trading is all about managing risk. The stop might have been hit today, and if I had taken no action I would have been down about a dozen points (two or three points per contract, allowing for slippage which is endemic in the wheat market). By taking the action I did, I ensured a profit of six to eight points, with the possibility of an overall profit of around thirty points.
So, without being too prescriptive, my advice to you is to trade a market where you can afford to enter positions with multiple contracts, then carefully consider what your exit strategy is going to be.
Keep in mind that you do not have to sell all your positions at once, a point that is often forgotten in the heat of battle.
For that matter, you do not have to buy all your positions at once either, but I will leave that discussion for another day.
David Bennett trades US commodity futures from his home on the Gold Coast in Australia. He provides coaching and mentoring services for people wanting to start trading for themselves. Visit http://www.12oclocktrades.com to read more futures trading articles.
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Trading Commodities - Margins

If you've been reading the newspaper lately, you've doubtless seen how much inflation has gone up over the last two years. You might be thinking, as many do, that this is likely to continue for the next two years. However, you can hedge your portfolio against inflation and maybe even pick up some profits by investing in gold.
Don't worry if you don't have $58,000 to purchase 100 troy ounces of gold at the current market price of $580 per ounce. Instead, you can buy a gold futures contract, as many speculators do. Instead of having to come up with $58,000, you only have to invest 5% of that total, or $2900.
That 5% initial investment is known as the initial margin. The exchanges and brokerage firms set the exact percentages on a daily basis. This is done per individual commodities futures contract. The exchanges monitor volatility, price and many other factors to figure out what acceptable levels of risk are. Then, they said the margins accordingly. The minimums are set by the exchange, but but brokerages will sometimes use requirements that are slightly higher.
If the price of gold rises by five dollars before the contract expires, that excellent. You've made five dollars per ounce of gold, times 100 ounces, which equals $500, excluding commissions of about $20. If you had purchased the gold straight out, you might be surprised to learn that your profit is exactly the same. However, look at the difference between doing an outright purchase and doing a futures contract in percentage terms.
$500 divided by $58,000 times 100% equals 0.86%, or just under 1%. This compares to $500 divided by $2900 times 100%, which equals 17.2%. This difference is from the effect of what is known as leverage. Even though you only invest 5% of the total purchase price, you get 100% (besides commission) of the profits, instead of 5% of the profits.
However, this is not only good with no bad. This type of reward carries risk of loss. Let's say the price had decreased five dollars and had never risen again before the contract expired. What you would have had would have been a $500 loss instead of a $500 gain.
Now, brokers have to protect themselves against the possibility of something like this happening, namely that you won't be able to cover your amount at contract expiration. Therefore, they do what's called a "margin call."
What this means is that all potential profits and losses are both calculated and settled on a daily basis. If the price drops under the minimum set by the broker, which is based upon the exchange minimum, brokers require that their clients deposit additional funds in order to bring their account back up to the level they initially had.
Now, here's the problem. Brokers may or may not give you enough time and notice to actually do that. Depending on what the price volatility is, the amount of money involved, and the quality of your relationship with them, brokers can and sometimes do liquidate your position and don't wait for you to cover.
Normally, most brokers will give you enough notice and reasonable time to cover this "maintenance margin," which is the amount needed to bring your account back up to the level they require. However, it's you, the trader, who is responsible for monitoring your own position and knowing what the guidelines are.
In addition to bringing your account back up to the previous level, you might also have to come up with even more money. Exchanges and brokers often do raise or lower the minimums they require, depending on what the current market conditions are.
Simply put, futures trading is fast-paced and puts you at higher risk in the world of commodities. It's not for everyone, but if you have a high tolerance for risk and can put additional funds in as necessary, and if you can withstand some losses as a matter of course, it might just be for you.
Visit 123OnlineTrading.com - Commodities, Stocks, Forex to find books, tips and advice about online commodity trading. Besides a large selection of free educational articles you can also find powerful books about online trading in general.
Other Resources:123OnlineCommodityTrading.com - Commodity Trading Links
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Day Trading Like A Pro

Volatility Is The Key To Day Trading
Successful day trading requires the ability to spot trends and patterns quickly, and act on them. It's tough to know which stocks to watch, but once you have learned the skill, you will be ahead of the game. You should maintain a watch list!. These are a cross section of stocks that you keep an eye on. Many stocks have recognizable patterns, and with a little experience at watching the same group of stocks , many traders can make educated guesses about whether the stock is about to move up or down. Most day traders, at least the successful ones, make trades from their watch list. There are several criteria for choosing stocks for your watch list!
Probably the most important is liquidity. I always look for stocks that trade at least 250K shares daily. If the stock isn't trading well, you may have trouble selling when you need to get out. If you can't sell the stock, you're obviously not going to make any money. I would rather trade stocks that are moving over 1M shares a day, but certainly never less that 250K. If the stock is too thinly traded, the market makers can manipulate the price too easily.
You will also want to look at volatility. Volatility is the rate at which the price of a security moves up or down. A $20 dollar stock that moves up or down by $5 in a day would be considered highly volatile. Large price swings are where knowledgeable day traders make money, and others lose money. In my opinion this is one of the most important criteria. Good stocks , at least from a day trading perspective, are volatile. Day traders make money when the price moves dramatically over a day, or a few days. Avoid high dividend stocks . We are not in this for the long term, so the dividend is irrelevant, and these stocks tend to have high prices and low volatility. There is certainly nothing wrong with dividend paying stocks , but they should be part of a long term investment strategy, not a trading medium.
Big board stocks can have high volatility and large price swings. But measured by percentage, nothing has the volatility (and risk) of pinksheet stocks or "penny stocks ". These low priced stocks trade for under a dollar, and at times can have huge volume. Some stocks make moves of as much as 100%-200% or more IN A DAY. There is obviously a tremendous amount of risk here. But you can start out with only a few hundred dollars. As long as you pick well, you can actually make money. I know people who make their entire living from trading (mostly) penny stock.
Put together a list of 30 - 50 stocks , get to know everything about them. What market factors affect their movement. What news items cause them to move up or down. This is your stock farm, cultivate it. Once you know what moves your stocks , you will be able to trade like a pro.
Chuck Hoskins is a frequent contributor to http://www.TheArticleShare.com
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Trading Psychology - Fear And Greed

No matter what system and tools are available to those who are day trading online, true success in trading still relies on the psychological strength of the individual trader. Day trading is a system based on rules, but as charts are analyzed and prices fluctuate, traders may find that they have a difficult time sticking to those rules when fear or greed become involved in the analysis. Successful traders are able to buy despite feelings of fear and sell despite feelings of wanting to prolong the holding of a stock.
A confident trader will still take the time to test and re-test a stock. At first glance a stock might look like it's in top shape and performing as expected, but a successful trader will not solely rely on first glance appearances. Those who day trade stocks know that in an instant the market can change and it's important to stay abreast of company information as well as market news and conditions. A successful trader will stick to the rules set up in day trading systems to ensure that his or her reactions remain unbiased throughout the trade.
Effective day trading strategies focus on providing consistent and disciplined actions. Successful traders have a consistent approach to the market and trading. They will take the time to systematically build up their own trading system that takes into account their own personal elements of risk control and they will take the time to stick to their original trading plan. It's not that traders shouldn't make changes based on market information, but that the changes made should be based on established trading rules that help traders determine what their entry and exit points on a trade should be.
Some of the best day trading tips that a trader can get help them deal with fear and greed. Many traders find that they may be able to memorize the rules and familiarize themselves with knowing how to accurately interpret stock charts, but they also need to learn how to prepare themselves to deal with fear and greed.
Fear in trading primarily takes on two basic forms - the fear of loss and the fear of missing out. The fear of loss leads to selling stocks prematurely and as a result, they aren't able to capitalize and recover fully on the trade. When they start to enter into trades, the trade isn't given enough time to mature and the trader sells so that more isn't risked.
The fear of missing out is another form of fear that compels people to abandon their rules so that they don't lose out on another major stock move. These fears need to be dealt with because they will impact a trader's entry and exit decisions.
Greed is the motivation for over-confidence. Dreams of "making it big" in trading can cloud a trader's perspective. Again, they abandon the rules of their trading system in the hopes that more money will come their way. Traders need to learn how to deal with greed so they can maintain their focus and not have their thoughts be swept away with illusions.
Manny Backus is an expert at helping day traders make hundreds or thousands of dollars within just the first hour of the trading day. Visit Day Trading Pro, http://www.daytradingpro.com/ for more information.
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Support And Resistance Technical Analysis And Day Trading

Let's start with a definition of support and resistance. Support is an area of accumulation where the price of the stock is cheap enough so that people buy more (accumulate more) of the stock. Resistance is an area of distribution where the stock is at a price that traders deem to be too expensive or when they want to protect the profits they have earned, so they are encouraged to distribute or sell their holdings.
Traders who are able to successfully determine areas of support and resistance have the ability to potentially profit from market movements. Fear and greed are the two major driving forces for market movement. Those who are day trading online know that while there may be many reasons for purchasing and holding a stock, the overall market movement is based on human instinct. With that in mind, styles of trading such as day trading, swing trading and momentum trading all utilize support and resistance analysis for potential market gain. Here are some day trading tips to help you identify areas of support and resistance.
1) Identify a strong area for support or resistance.
Traders who are day trading stocks should look for the number of times that a support or resistance line has been tested. For example, if a stock has been at $40 eight times in the past six weeks and has also been at $45 three times during the same time frame, the stronger line is at the $40 price.
2) Identify horizontal and diagonal lines of support and resistance.
Traders may easily see horizontal lines of support and resistance, but they should also know that identifying a diagonal trend helps to forecast upward or downward movements of the stock. For example, the price might fluctuate daily, but if over an eight week period the price moves from $40 to $41 to $43 to $44 to $45 and so forth, traders are able to see a very apparent upward trend in stock price.
3) Identify when a support or resistance line has been broken.
If the stock prices falls below or climbs above the support or resistance line, the trend of the stock has changed. The stock might become bear, bull or neutral and day traders may need to rely on other indicators that are part of their day trading strategy to determine what action to take concerning the stock. A quick tip to help you identify if a trend change has occurred is by looking at the amount of the price difference between the support or resistance price and closing price. If the closing has at least a three to five percent difference from the support or resistance price, then most likely the line has been broken.
Support and resistance are important aspects of many day trading strategies. As you get more familiar with identifying these lines, you will strengthen your trading system and have greater potential to capitalize on market movement profits.
Manny Backus is an expert at helping day traders make hundreds or thousands of dollars within just the first hour of the trading day. Visit Day Trading Pro, http://www.daytradingpro.com/ for more information.
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